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Bankruptcy NEWS

- Nov-10-2017

According to a report earlier this month by the American Bankruptcy Institute, consumer bankruptcies are up so far this year. For example, there were 92,669 bankruptcies filed in January, however, there were 102,686 filed in February. Last year there were 5,847 Massachusetts bankruptciesfiled in the first quarter. According to the ABI, the cause for the continued high rate is “high unemployment and a still-poor housing sector.” The Wall Street Journalnoted that this is an 11% increase from the previous month. On the other hand, Massachusetts bankruptcy attorney Neil Burns notes personal bankruptcies are down from a year ago. The above numbers include Chapter 7 no asset bankruptcies, Chapter 11, and Chapter 13 consumer reorganization bankruptcies. Last year there were over 1.6 million bankruptcies; we are below that rate so far this year. The total Chapter 7 bankruptcies for 2010 was 1.1 million. The ABI notes that the number of bankruptcies has increased each year since the new law was put into effect, 2005.

(HAMP) which is the current mortgage program is not available for chapter 7 bankruptcy filers. This program was designed to help over three million homeowners, however, to date, has been used by only about 500,000 homeowners. This program is being criticized by both sides on Capitol Hill. At the recent hearings, it was pointed out that the program is more bureaucracy than effective legislation. While we are not confident that this will pass anytime soon, we are pleased that the Congress is addressing a problem affecting so many folks in Massachusetts. Further, in Bankruptcy Court, we can’t do anything about mortgages that are current, albeit at a high interest rate.

There are hearings in Washington to explore giving Bankruptcy judges more power in rewriting mortgages. This could have a dramatic effect on defaulting Massachusetts homeowners, especially those that file for personal bankruptcy in Massachusetts. Rhode Island Senator Sheldon Whitehouse and the Senate Judiciary Committee, held hearings regarding allowing bankruptcy judges to modify mortgages.